- Indian Rupee (INR) drops to two week low
- India – China border relations sour again
- Safe haven US Dollar (USD) rises as Trump takes aim at China
- With no US data, sentiment will drive the pair
The US Dollar Indian Rupee (USD/INR) exchange rate is extending gains for a second straight session. The pair settled on Tuesday +0.2% at 73.44. At 11:50 UTC, USD/INR trades +0.6% at 73.90 a two-week high.
India- China border tensions are weighing on demand for the Indian Rupee. Both India and China are accusing each other of firing in the air in a fresh border confrontation on the ill-defined stretch of border in the western Himalayas.
As tensions escalated between the two sides, the first shots were fired in 45 years. Despite longstanding frictions at the disputed border, forces had (until today) observed the long-held protocol to avoid using firearms along the stretch of border.
Whilst neither side has reported casualties, the incident highlights the souring of the relationship between the two nuclear powers, which pulled on risk sentiment.
Separately, rising covid cases are also acting as a drag on the currency. India recorded its highest number of daily deaths from coronavirus in over a month as the rate of infections continues to soar. On Monday, India surpassed Brazil with total cases rising to 4.2 million making it the country with the second highest case load.
The US Dollar is pushing higher across the board on safe haven flows. President Trump ramping up his anti-China rhetoric in his latest election speech is unnerving investors. Trump promised a tougher line on trade with China and also vowed to end reliance on Beijing, whilst “decoupling” from China.
Concerns over US – China future trade relations and another deep sell off in US tech stocks is adding to the risk off climate. With no high impacting US data to focus on, sentiment is expected to continue driving trade.
